Roundup: Hurdles remain for Australian agribusiness to fast-track Chinese investment

Contrary to widespread perceptions
that Chinese investment is swallowing large swathes of Australian
farmland, the latest KPMG research suggests that China is far from
a major agricultural investor in Australia, and owns less than one
percent of Australian farmland.

The latest report into Chinese
direct investment by KPMG and The University of Sydney's China
Studies Center -- Demystifying Chinese Investment in Australian
Agribusiness, released Tuesday at a forum focusing on Chinese
investment -- looks at the scale and composition of Chinese
large-scale commercial investment into the Australian agricultural
and agribusiness sectors.

KPMG has studied China's food
demands and offers practical initiatives Australian companies can
take to attract further investment.

"This is an important debate and
now is the time to have it. Australia has important choices to
make," said report co-author Doug Ferguson, Head of KPMG's Asia
Business Group.

"China is not only Australia's
largest trading partner, but also the largest trading partner of
more than 120 economies many of which are competing for
agricultural trade and investment, including New Zealand. Foreign
investment in the agribusiness sector is a complex and confronting
issue for many in industry, government and broader society. As a
result of this focus, Chinese companies feel cautious about
engaging with Australian agribusiness."

The research has found that,
Chinese investment in Australia's agricultural sector really only
kicked off quite recently.

"Our database shows a total of only
10 completed deals, with an accumulated value of 1.05 billion U.S.
dollars invested in the Australian agricultural sector since 2006,"
said Professor Hans Hendrischke of the University of Sydney
Business School.

"Last year, Chinese investment into
Australian agriculture accounted for less than 3 percent of the
total Chinese overseas direct investment into Australia, including
the Cubbie Station deal. Overall, between 2006 and 2012 only 2
percent of Chinese investment to Australia has gone into
agriculture."

By the end of last year China was
only the ninth largest foreign agricultural investor in Australia,
at 3 percent of the total outbound direct investment (ODI). This is
well behind the USA at 24 percent, the UK at 14 percent, Japan at
10 percent, and even Singapore at 4 percent.

"Foreign companies are estimated to
own 11.3 percent of Australian land and Chinese companies appear to
own less than one percent of Australian farmland," said Professor
Hendrischke.

New South Wales attracted nearly 50
percent of completed Chinese agribusiness investment in the
research period, followed by Queensland (40 percent), Western
Australia (5 percent) and Tasmania (5 percent).

Deal sizes tended to be smaller
than other sectors, with 60 percent of Chinese investment in deal
sizes of 5-25 million U.S. dollars. Only 10 percent of deals were
valued at more than 500 million dollars.

The vast rural acreage in
Queensland including farms, and commercial property valued at more
than 70 million dollars was showcased in Chinea last month by a
prominent Australian real estate company.

Landmark Harcourts' first China
roadshow wound through Beijing, Shanghai, Tianjin and Hong Kong
with a portfolio of 80 Australian - mainly rural - properties
valued at over 200 million Australian dollars.

However, KPMG suggests more
understanding of the China's needs and cultural sensitivities are
required than simply taking Australia's agricultural potential "on
the road."

Regarding the strategies for
tackling the challenges facing the Australian agribusiness,
Ferguson encourages Australian businesses to up-skill in Asian
business practices and become more culturally aware.

"The way that we feel about Asian
investment must change to be more pragmatic and objective. There is
much work to do on both sides. For Australia, a huge public
education program which sets out the facts, explains the realities
of Australia's future with Asia and China and encourages
respectful, positive approach is critical," Ferguson said.

According to the report, the new
Coalition Government's plans to lower the threshold at which the
Foreign Investment Review Board (FIRB) can review farm investment
from the current 248 million dollars to 15 million dollars could
hamper and even derail FTA talks and sound investment planning.
Endi

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Roundup: Hurdles remain for Australian agribusiness to fast-track Chinese investment

Contrary to widespread perceptions that Chinese investment is swallowing large swathes of Australian farmland, the latest KPMG research suggests that China is far from a major agricultural investor in Australia, and owns less than one percent of Australian farmland.